Isaksson, Frida

Abstract [en]

Background: Tax avoidance is a commonly discussed issue. Previous studies have investigated different factors and their relation to tax avoidance by measuring effective tax rates. One interesting factor, due to its inconsistent results in previous studies, is the relationship between effective tax rates and firm size. There are studies that state that larger firms tax avoid more compared to smaller firms in line with the political power theory. Also, there are studies that indicate the opposite, that larger firms tax avoids less, in line with the political cost theory. To our knowledge, previous research of the relationship between firm size and effective tax rates in Sweden, is limited and is therefore an interesting research direction.

Purpose: The purpose of this study is to see if Swedish listed firms tax avoids more if they are larger compared to smaller firms.

Method: The financial information required to calculate and define the variables used for this study is collected for the Swedish listed firms that fulfill the selected criteria. The final sample of firm observations included in the study is 132 for the years 2014-2016. A regression analysis is performed with two measures of effective tax rates as the dependent variable, in relation to firm size measured in three different ways as the independent variables, and selected factors as control variables.

Conclusion: The result shows that larger firms are more likely to tax avoid compared to smaller firms, for some measures of firm size. A positive relationship between effective tax rates and firm size measured by revenue is concluded, in line with the political cost theory. The relationship between effective tax rates and firm size measured by total assets and market capitalization is negative, hence the results are in line with the political power theory. Further, we conclude that other factors than firm size can have an impact on the effective tax rate of a firm.